It’s too early to cast fading star into a mere cameo role
The announcement that Naspers will shed its pay-TV division has led many to believe that MultiChoice is on its way down. After all, the parent company has evolved from media giant to internet giant thanks to good bets on the future.
It made a fortuitous investment in $400bn (R5.6-trillion) Chinese juggernaut Tencent when it was worth a fraction of that, parlaying a $132m investment into a global e-commerce empire.
But there is a deeper justification for the separate listing. MultiChoice remains a massive success story, with a R47.1bn turnover in the past financial year. It employs 9,000 people and its Phuthuma Nathi share scheme is one of the great BEE successes. However, it is almost impossible to mention it without that other entertainment giant, Netflix, with its global reach and a massive original-content catalogue.
“Ultimately, although we lead in pay-TV, we are going to have to transition into the internet-content world, which is very different from the commerce world,” said Imtiaz Patel, CEO of video entertainment at Naspers. “We have a strong local content capacity. It’s a big differentiator and we will double down on investment in local content. Naspers always had to decide whether to invest back into pay-TV or e-commerce because it had a smorgasbord to choose from. Now we also have a smorgasbord of decisions of where to invest but it will be more core to our business — in content, systems, new technology and bolt-on businesses.”
The unbundling announcement coincided with news of a partnership between Netflix and British pay-TV provider Sky. Asked if a similar deal was possible between MultiChoice and Netflix,
Patel responded with a cryptic “Watch this space”.
While many contrast MultiChoice’s DStv with Netflix’s entertainment offerings, he said, few understood the cost of sport, local content and news channels. However, the cost of DStv’s premium package, now close to R1,000 a month, is generally regarded as a broken business model. It represents a powerful incentive to jump to Netflix, at about a tenth of the cost — as long as live sports and news are not a strong interest.
Calvo Mawela, CEO of MultiChoice Africa, said the value of the premium package was not appreciated. “We’ve invested heavily in the DStv Now app so that viewers can cut across from satellite to online streaming, with all channels now available for many devices, and we’ve invested in content for our Showmax videoon-demand service. There is no way we can be compared with Netflix.”
Still, people will compare. About 140,000 viewers have migrated from DStv Premium to Netflix in the past two years. Mawela hopes communication of the value of the package has stemmed the bleeding.
The underlying health of MultiChoice is better expressed in the growth of its overall subscriber base, with 2.5-million new customers in the past two years. The current year is expected to maintain that rate of growth. It suggests that, across African economies where fibre broadband is still a distant dream, MultiChoice will be able to keep the Netflix nightmare at bay.
Comparisons with Netflix don’t do DStv justice, says Naspers